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Big Hollywood’s digital push may mean the end for independent theaters

Ark Lodge Cinema owner David McRae, and building owners Alex Rosenast and Keith Robbins put their heads and hearts together to bring the cinema back to Columbia City. Credit:
Ark Lodge Cinemas

Bellingham’s Pickford Film Center is downright neighborly. As the only 365-day independent cinema between Seattle and Vancouver B.C., the Pickford’s mission “is to provide a forum and resource for independent cinema, strengthening community through education, dialogue and the celebration of film.”

Apart from screening movies outside the major studio rotation, Pickford celebrates regional filmmaking with the NW Projections Film Festival, a filmmaking competition for high schoolers, a month long international documentary series, a children’s film festival that provides free screenings for at-risk youth, and outdoor summer movies. They’re also struggling to update their equipment.

Michael Falter is the theater's director of programming, which means it's his job to borrow films from movie studios for the Pickford to screen. But the process isn’t so easy anymore. In a move to cut costs, Hollywood's major studios are banding together to shift film distribution to digital formats, rather than the traditional reel of film. The Pickford can’t afford the upgrade.

The overhaul doesn’t come cheap. For new equipment, the Pickford can expect to fork over $225,000 — $70,000-$115,000 per screen. Like many independent theaters, they’re looking to the community for support. Donations have helped raise $75,261, about 33 percent of what they need for a full digital renovation.

In November 2010, Twentieth Century Fox sent a letter to theater exhibitors across the U.S. and Canada urging them to update their projection equipment to digital formats, as the date would one day approach when major movie studios would cease distribution of traditional, 35 millimeter celluloid films.

Some 25,000 theaters complied, putting themselves in the good graces of one of Hollywood’s largest film distributors. But thousands hadn’t updated. They got another reminder: “The time is now for digital conversion for those theaters that wish to continue to license Twentieth Century Fox and Fox Searchlight motion picture product for theatrical exhibition into the future,” the letter noted.

Fox wants to go totally digital, and they’re not alone. Other key Hollywood studios want to give 35mm the axe too. Some of the biggest players in the business, such as Metro-Goldwyn-Meyer, Paramount Pictures and The Walt Disney Company have united in an effort called Digital Cinema Initiatives (DCI). Their aim: To establish certain, universal specifications for digital cinema that is cost effective, reliable and state of the art.

While going digital seems like a windfall to studio heads, the overall effects could be disastrous for smaller theaters. By cutting 35mm distribution, some industry insiders have estimated that as many as 10,000 screens across the U.S. and Canada could go dark for good. John Fithian, president of The National Association of Theaters Owners, has repeatedly remarked on those mostly independent theaters still operating solely on 35mm technology: “Convert or die.”

While there is no exact date as to when studios will stop 35mm distribution completely, sometime in early 2013 is considered to be the end date. Time is running out, and a digital overhaul has reels of difficulties to overcome.

The industry is trying to shift to something called a Digital Cinema Package (DCP). Instead of shipping bulky, expensive film canisters to theaters, studios will streamline the process and reduce the distribution of movies to a digital hard drive, roughly the size of a paperback novel, as a way to save on dollars.

It costs a Hollywood studio anywhere from $1,200 to $1,500 to strike, or produce, a single 35mm film print. With about 4,000 copies of each film distributed nationwide, the costs add up fast. Movie studio’s spend nearly $850 million a year making film prints. Conversely, a DCP runs a mere $80 and is heavily encrypted and encoded to curb piracy.

To incentivize the process, studios have agreed to subsidize the conversion. Because of the cost savings, studios will pay exhibitors a “virtual-print fee” over the next seven to ten years for movies shown digitally to pay off the investment undertaken by theater exhibitors.

That system makes sense for larger, nation-wide chains. Mega-plexes like AMC and Lowes run only new movies on anywhere from ten to fifteen screens simultaneously, so a digital investment is almost guaranteed to pay for itself with money earned by the fee.But the specifications for DCP were designed mostly for larger, multi-screen chains, leaving many smaller, independent theaters out in the cold.

The $100,000 investment would be crippling for most smaller theaters, many of which have only one screen with fewer than 100 seats. On top of that, theaters like Pickford often show a range of old and new, foreign and archival films — none of which qualify for the virtual-print fee. Relying on returns from the virtual-print fee, which is centered on first release motion pictures produced by studios comprising DCI, would drastically restrict the theater’s programming.

“We’re like the motley crew that’s left over after the primary transition took place,” Falter says of the smaller exhibitors still operating 35mm. “The primary transition had a totally different footprint in terms of who they [studios] were trying to get involved in that early transition, and how they were supporting those chains, and what they needed to make that transition happen as quickly as possible, and that meant giving them a ton of money.”

Tight budgets and thin profit margins make DCP a nightmare, not a benefit, as most small theaters still view things like popcorn sales as an important source of income.

Nevertheless, DCP is attractive and efficient. Digital is cleaner, safer, faster, and in some ways, more reliable. When Falter booked The Master to run at the Pickford, it brought in a new crowd of viewers. As a first run, new release movie shot using film, the Pickford had the ability to offer something that the larger chains in the area couldn’t. But when the first copy arrived in Bellingham, two reels were completely raked.

“We had to call Technicolor and tell them this wasn’t acceptable,” Falter remembers. With DCP, getting a movie ready to screen will be more like loading up a playlist in iTunes — blemish free. “There is an efficiency to DCP,” Falter adds. “There are no scratches and you can load it in no time at all.” In the land of 35 mm film, scratches on prints were a common occurrence. Sometimes films would go missing completely. It even got to the point where studios had no idea which movies they owned the rights to.

And the frustrations don’t stop there. The film industry is hardly keeping pace with technology advancements. Oftentimes, if a theater wants to screen an obscure B Picture, and the print is long lost and now only available on a DVD or Blu-ray, the rights may be available for the DVD, but not the Blu-ray. “The business just hasn’t caught up with the technology yet,” Falter says. “The lag on these things is incredible.”

Studios have already started purging old film stocks in their archives in order to make way for digital archives. Warner Bros. has stopped lending out 35mm films, and Fox will not allow theaters to purchase the rights to movies played on DVDs anymore, only DCP.

“Yeah, it’s a good time,” Falter says sarcastically.

Still, some of Washington's smaller independent theaters are embracing the change. David McRae is reopening Seattle’s Columbia City Cinema on Saturday as the Ark Lodge Cinemas. And the one-time Masonic Lodge, built in 1921 and supporting three screens, will be completely digital.

“I love film and love playing it,” McRae said, sitting in the theater's Stanley Kubrick-esque upstairs lobby. “The problem is the distributors themselves didn’t want to pay the people it takes to run things right.”

McRae knows the ins and outs of DCP. He was the technician on site for the digital upgrades to some of the larger chains in Seattle, and our conversation is filled with a spate of technical acronyms: DCP, VPF, DCI, KDM (key delivery message). David calls them TLAs, or “three letter acronyms.”

His primary function as a technician was to be in DCPI Compliance. This meant making sure the projector’s light meters were working properly, respecting the aspect ratios to make sure they weren't over-cropping the picture and that the lenses worked correctly to maintain the right resolution.

It’s a tech-savvy job, but McRae grew up in the business. His parents owned the Cine-Mond in Redmond, and after years of cutting his teeth working as a film projectionist, he knows that going digital is a necessity for the Ark Lodge.

McRae also points to another problem with the old 35 mm system: A lack of training. “The thing that was killing film was the people who were running the projectors,” McRae states.

Some theaters still screening 35mm thread the film into the projector using what’s known as a platter system, a notoriously damaging method. The platter, a large, multi-layered reel system, spools the film out from its center while the print lies on its side. The advantage is that it is self-rewinding and can splice together the multiple 20-minute reels by which a film is shipped to a theater.

McRae says that absent-minded projectionists would often damage prints, and theaters would then be charged a fine. It became so prevalent, in fact, that exhibitors began telling projectionists not to report any damages; in effect they could claim no knowledge of the neglect. Cineplex in Factoria even had McRae’s cousin Miles, also a projectionist and owner of McRae Theater Equipment, Inc in Ballard, drive out across Lake Washington every three months to perform routine maintenance checks on their equipment.

“It made me ill,” Miles says wearily.

With the added costs and high incidence of error in 35 mm, it's not hard to understand why studios are itching to make the switch to digital. This wouldn't be the first time Hollywood has had exhibitors over a barrel, either. Ironically, it was a similar stranglehold in the 1940s that helped create the very art house theaters that are now in trouble.

The Hollywood Antitrust Case of 1948 considerably weakened the monopoly of film studios at the time and would eventually lead to the end of the golden age of Hollywood. Prior to their dismantling, the five major Hollywood studios at the time — Loew’s/MGM, Paramount, Fox, Warner Bros. and RKO — were working together as a conglomerate and owned the theaters where their movies were shown, thus creating an anticompetitive market.

The Department of Justice sued Paramount for violating the Sherman Antitrust Act of 1890, and the case went to the Supreme Court in 1948. The court ruled against Paramount, stipulating that studios could no longer sell multiple, sight-unseen blocks of films to a theater (sometimes up to a year's worth). A practice then known as "block booking."

The landmark case gave rise to a community of independent producers and theaters that started showing films, often foreign, outside of the Hollywood system. Now Digital Cinema Initiatives, composed of seven of the most powerful film studios in the world, may be the new Big Five.

The effects of a digital revolution are not as subtle as you’d think. In January 2012, Kodak Film filed for Chapter 11 bankruptcy protection, and its titular theater was renamed the Dolby Theater. Universal Studios Orlando has decommissioned its famous Jaws ride to make way for the next generation of entertainment.

In Washington state, Arlington’s historic Olympic Theater is in danger of closing its doors after 73 years. “Switching to digital is a humongous expenditure and there is no way I can afford it,” owner Norma Pappas told the Everett Herald in August 2012.

More troubling though, is the apparent lack of foresight into film preservation and the artistic merits of making movies.

“You have to know how to shoot digital or else you’re not employable,” said Chris Mosio, a cinematographer and teacher at the Seattle Film Institute. “And archiving is a real problem. Formats change so quickly that no one has come up with a solution except transferring and re-transferring. Whatever the solution will be, it’s not going to be elegant." Digital cinema recycles itself often enough that current formats have the potential to become obsolete in a matter of years, leaving the future of archiving movies uncertain.

Digital has yet to come up with a way to best film preservation. In the documentary Side by Side, which looks at Hollywood’s history with film and its transformation to digital, director David Fincher (Fight Club, The Girl with the Dragon Tattoo) explains that digital technology updates so frequently that there are music videos he shot in the early 90s that are unwatchable. The formats to play them on simply do not exist anymore.

For filmmakers, shooting in digital is undeniably more efficient. They no longer need to wait on film to be processed to view dailies of their movies and the feedback is instant. But in the age of Instagram, where color correction makes even the most routine bathroom pic a masterpiece, we may be losing the art by adversity way of film.

“Looking with your eyeballs is something we are sort of losing, the way we look at light falling on a person,” Mosio says. “I recently saw The Artist on digital, and it was almost unwatchable. The projection was totally milky and flat, and the theater owners had no explanation. There is definitely a learning curve for theater owners.”

Back at the Pickford, theater manager Ryan Uhlhorn is busy threading up the documentary Chasing Ice for the next screening. A local high school class away on a field trip just walked out of the previous showing, and they’re all talking enthusiastically about the film’s time-lapsed sequences of the changing glaciers. In the corner of the lobby, a make-up artist applies fake lacerations and prosthetics to a zombie extra appearing in a film for the Bleedingham Film Festival held at the theater. Employees work the concessions, getting it prepared for the next crowd.

As Ryan continues to assiduously weave film in and out of the sprockets of the projector, he grabs a nearby remote control and presses play so a Blu-ray of Jaws will light up the vacant screen. We watch the famous beach scene through the small hole in the theater’s projection room. Ryan talks about the digital servers, film splicing and 4K resolution and I nod along like I understand everything. I don't, of course. But what I do understand is that this place is “downright neighborly,” and it would be a shame for the credits to stop rolling for good.